There Is A Probability Of Total Wipeout – Raoul Pal Bitcoin On Crypto.
Weve got these other risks that we dont understand, such as the debasement of money. These are risks. We dont really understand theres, also confiscation risks, and we see that periodically. Basically weve seen it in china now weve seen it in russia in the past were all running risks. Then weve got a pension system, thats, underfunded and so people dont understand that the fact that what they think is a retirement nest, egg, a is going to be worth less in real terms and b is not enough and weve also got the social security or state Benefits system, which is underfunded, which could bankrupt governments weve got a lot of these big existential risks. Are we getting rewarded for them that i dont think we are were not getting rewarded in government bonds anymore for the risk of something bad happening, whether its excessive inflation or whether its a government defaulting which almost happened in europe so right now, greek government bonds are Negative, but if the ecb wasnt there theyd default and youd lose all of your money, so bitcoin looks riskier because its more volatile, but what a professional does is look at the risk reward. What is the risk? Well, the risk is probably call it 75 downside over a two year period. Is there a risk of it going to zero its almost negligible now so lets call it a 75 percent downside. Well still, on average, it goes up 213 percent, so thats a three for one risk reward every single year and over a three or five year time, horizon 10 cigarette like 10x and generally only with one of those drawdowns of that magnitude.
So its much less risky. Also because, as you talked about before its actually not correlated with other stuff, so most of us have legacy pension systems and houses that we bought and other stuff well, how does bitcoin fit into that? Well, its not correlated to all of that so offers benefits. So if the world goes to hell in a handbasket chance, our bitcoins going to appreciate in price so its a hedge, its how people use gold in the past as well. But this happens to be gold for the digital age and thats, a very powerful thing. So it may be perceived as risky, but again youre, also looking at it through linear eyes, just to explain to people exponentiality versus linearity. So if i take 20 linear steps across my office and into my lounge, you know i get call up 10 meters across. If i take 20 exponential steps, i go around the world like twice thats what people cant understand? How can that be, but thats what exponentiality is so that is going to be volatile by nature, but its going to be offset by the re returns that you get. Firstly, okay: how does this financial system manifest itself the the the blowing up? Is it going to end in a bang which is what everything so the dollar goes to zero and everybody blows up and all the banks blow up, thats not going to happen and the reason being is theyve discovered a magic trick, which is you keep printing money And you you hide it, but what that actually does is lower the value of your purchasing power.
So if you look at it in different terms, your same salary buys less of a share of the s: p 500 bar of gold or a share of a bitcoin than it used to before they started printing money and every time they print money, keep these things. Keep accelerating away what are assets assets are your future consumption. You store your money in an asset and then later you sell it to allow you to spend it thats what assets are so youre being able to buy less future consumption. I youre poorer in the future, and so that creates a big problem. The other thing is, the governments are kind of bankrupt by having spent so much money trying to bail out the economy so many times that theyre going to tax you more so. Therefore, your income is going to be less, your future is going to be less. This is not good and theyve got the risk of banks blowing up and other things, which means you could lose all of your capital. So youve got a sinking ship, its probably sinking. Slowly but like the frog in the boiling water, you dont really realize it, and most people dont really understand it. They keep looking for the wrong thing, the dollar to go to zero or something to happen, and they dont realize theyre already getting screwed but theres. The life raft, which is bitcoin because bitcoin with its restricted supply and its outside of the banking system, no leverage, basically or over collateralized with the recorded ownership, is a way of putting your assets into something that over time should do extremely well, even if its just Because the central banks keep debasing the currency, bitcoin will go up just by that amount, but as we know, it also gives you a call option on the future.
So what youve got is an asset class thats. Currently, just bitcoin alone is currently just under a trillion dollars today, if we look at the size of the global equity markets, global bond markets, um global real estate markets are all between 100 and 200 trillion dollars. So what is what could bitcoin be worth if that life raft takes us to dry land and gives you a chance, its probably worth a hundred trillion dollars, so its got 100 x to go from here? Nobody watching this or listening to this will ever see an asset in their lives. Go up. 100X thats already gone up, two million percent, so its the opportunity of everybodys lifetime to actually create wealth, and it protects your wealth for the factors such as you know. Excessive taxation, although you cant really get out of the tax system, but it gives you optionality. It also gets you out of this currency. Debasement cycle that were in also were in a very difficult world. Part of my exponential age thesis is the rise of technology such as ai robotics, and all of these things. These are all going to be taking jobs, away and opportunities. Salaries cant go up over time because youre competing with the machines and, if not youre, competing with somebody else elsewhere in the world and weve got the baby boomers in the workforce at the same time as their kids, which has never happened before. So there is no salary going up, so the only way of generating wealth is to make the right investment decision or be lucky enough to start a business or you know or be in a business that pays more money.
So thats the magnitude of the opportunity of this life raft and what it can do for people so, whether they like it or not, its happening and behind closed doors. Of course, the ecb understands that it is supporting the entire european union by using its balance sheet and its printing money to do so, and this is not a good situation and the banks dont operate. The uk also knows that its banks are broken. They dont operate properly and the life systems on life support and requires monetary printing, because there theres no interest rate. The federal reserve understands that the bank of japan, everybody theyre, just not going to tell you, because if they do youll have lots of faith in money. So if they see the parallel financial system, these are not alien creatures. These theyll go. You know what this is pretty useful. Maybe this is the collateral for something that we can use. Maybe we can get away from the excessive leverage. Maybe it brings monetary velocity back and the answer was very quickly: we should join it, which was central bank digital currencies. We get it. This is where its going and weve got a broken banking system. So central bank digital currencies allow us to maybe circumvent the banking system, be able to give money directly to people or businesses and to get around monetary policy which has reached the end of its limits. So then, what theyre doing is telling you, okay, we get.
This were going to dovetail in with it, but we as governments need to make sure if were going to provide you with roads and garbage collection and all of this stuff. We need to get taxes paid because, if not were gon na go bust. So as long as we can tax it as long as we figure out theres, no criminal activity going on were kind of okay with it, because right now, its not big enough to matter. You know how, whatever people in bitcoin world think it is a one trillion dollar asset is noise when it gets to a hundred trillion dollars, yeah, okay, its the size of the real estate market or stuff like that, and it becomes more important. We know this is coming its a network, its growing ridiculously fast. What we need to do is try and slow it down, so we can get our ducks in a row which is how the hell do we regulate d5 nfts social tokens? How do we regulate the metaverse all of this stuff? They have no idea, but governments dont want to do that, because they have to walk away from things that they have to. They have taken to be truths, which is that some people should not be allowed to invest in riskier things right, so that came out of probably uh the 1930 crash um and there was a lot of scams going on and what theyve what the banks did was Lobby to say we should have control over how the capital gets allocated.
We cant give it to the people and the governments go yeah. That makes total sense. You know these guys are all getting screwed here. You guys are sensible what it meant for the banks is obviously a windfall gain that they control the whole system and thats the securities act. If you call it security, then, basically you have to go through a bank. We need to get rid of all of that and i think they know it. I mean gary genz has got to feel stupid in the u.s standing up saying you know. We think this is a security. They know that its not security, they just dont, know how to how to make sure that people dont get screwed and they get their fair share of it and they kind of get some ability to manage the pace of appreciation of the adoption before it. It gets rid of all the banks because you dont really need money centre bank. Why do you need barclays in the uk or some bank in ohio? You dont all those european money center banks, you dont need them because with defy fintech central bank, digital currencies and bitcoin youve basically got a whole financial system built for you. Youve got borrowing, lending, saving collateral and youve got transfer of payments instantaneous so its there and thats.